Affordable Housing Dries Up Across India, 31% Drop In Sub-Rs 50 Lakh Supply

India’s real estate market is leaving its most price-conscious buyers behind. In the first half of 2025, the supply of newly-launched homes priced below Rs 50 lakh fell by 31 per cent year-on-year (y-o-y), further aggravating the housing crisis for middle-class and first-time buyers. 

While the luxury and mid-premium categories continue to flourish, those trying to enter the property market for the first time are increasingly getting locked out because of the dwindling supply in affordable housing.

According to a report on India’s latest residential housing by Knight Frank, only 30,806 new homes in the sub-Rs 50 lakh category were launched across the top-eight cities in H1 2025, a staggering 23 per cent less than the number actually sold in that price band, which itself dropped 18 per cent y-o-y to just 37,796 units.

In cities like Bengaluru, where home prices have steadily crept up, the sale of affordable homes (under Rs 50 lakh) fell by 18 per cent compared to H1 2024, and by 85 per cent compared to 2018. 

It’s the same in every other major Indian city. Kolkata, for instance, saw a 67 per cent decline in new launches under Rs 50 lakh, while in Mumbai, it fell by 11 per cent y-o-y.

Affluent Buyers Move Up; Newcomers Back Off

The top end of the market, Rs 1 crore and above is booming. High-net-worth buyers are either upgrading homes or investing in multiple properties. In fact, 49 per cent of all residential sales in H1 2025 came from this segment. 

Properties priced between Rs 20 crore and Rs 50 crore grew in sales by 29 per cent y-o-y. 

According to the report, the reasons for the freeze in the lower band are many: job instability, rising interest rates, and a post-pandemic recalibration of life goals. For younger buyers, the rise in equated monthly instalments (EMIs) following years of rate hikes has stretched monthly budgets. For others, the hybrid work shift has pushed housing decisions out of the priority queue.

“Affordability is being squeezed from both ends. The cost of borrowing has risen over the last two years, even if we are now seeing some policy rate relief. But the bigger issue is lack of supply. Builders aren’t making under Rs 50 lakh homes anymore; land, input costs, compliance, everything has become too expensive,” the report said.

City-Wise Sales And Supply Breakdown

In the first half of 2025, new residential launches across India’s top-eight cities stood at 179,740 units, outpacing total sales of 170,201 units. 

City-level data revealed mixed performance. Mumbai led in sales with 47,035 units, but saw a 3 per cent dip in new launches. Bengaluru, despite a 3 per cent drop in sales, posted a 31 per cent surge in new supply, indicating aggressive developer activity. Chennai bucked the trend with a 12 per cent increase in sales and 9 per cent rise in launches, while Delhi National Capital Region (Delhi-NCR) and Kolkata recorded declines in both metrics.

Luxury Housing

In total, the Indian residential sector clocked 170,201 unit sales in H1 2025. That’s only a 2 per cent dip from last year, which on paper suggests resilience. However, the sector’s internal composition tells a different story.

Chennai was one of the few bright spots, showing a 12 per cent increase in sales, even though the sub-Rs 50 lakh supply remained tight. Mumbai continued to dominate volume-wise, with 47,035 units sold, followed by Delhi NCR and Bengaluru. 

But what’s notable is the tilt in sales. In Delhi NCR, 81 per cent of all homes sold were above Rs 1 crore. Bengaluru wasn’t far behind at 70 per cent. In contrast, only 36 per cent of Mumbai’s sales were in that range.

“The residential market in H1 2025 reflected a nuanced shift where premium and luxury segments continued to thrive, even as lower value segments showed signs of continued moderation,” said Shishir Baijal, chairman and managing director, Knight Frank India.

“Homes priced above Rs 1 crore now constitute nearly half of all sales, which indicates changing buyer priorities and rising aspirations,” he added.

The supply glut is also concentrated. Inventory of unsold homes rose 4 per cent to 505,000 units. But that’s not evenly distributed. Ultra-luxury homes in the Rs 20 crore-50 crore range are seeing far slower movement, with a quarters-to-sell ratio of 17.10, compared to 3.90 for the Rs 2 crore-5 crore bracket.